Money Does Grow On Trees
As referenced last month; Buying or selling real estate in today’s market requires owner(s) or prospective owner(s) to understand more than just the comparative value of the investment they are about to transact. This month we will be exploring timber with Brian Bullard, managing broker for Timberland Realty and Participating broker with Cabela’s Trophy Properties.
All too often we find both sellers and buyers that are perplexed over the concept that trees really do have value. Their value is borne out in different ways, depending on the objectives of the current property owner versus those of a potential buyer/investor. Most people that are looking to acquire recreational property have a vision for that property. It can be completely wooded, partially wooded, have a lovely trout stream as part of the vision; it can have a matrix of open/transition/brush/woods; it might be (or need to have) excellent deer, turkey , grouse or squirrel hunting attributes; all of these things have one thing in common…they need trees. Trees provide food, cover, shelter; they provide buffers to wind and snow; they provide beautiful colors in the Fall; they provide the cooling effect of shade for homes, camps, cabins, wildlife; they buffer noise; they enhance a breath-taking view; they also can provide an income stream if managed properly. While this is an abbreviated list, suffice it to say trees have value. This concept is as important to understand as a seller of real property as it is to be a buyer/investor in real property. More importantly, your real estate agent should understand this concept in order to provide the right market price and the right market strategy.
Timber is probably the easiest concept to understand regarding value. Once trees of desirable species achieve a given age (which differs among deciduous (hardwoods) versus evergreens (softwoods)) and specified diameter, they contain volume that can be harvested and converted into lumber, veneer, pallet stock, pulpwood, biomass, and more. In order to understand the value, State Foresters and Consulting Foresters are usually called upon to derive an opinion of value that can be used as part of the valuation process in selling the property. An expert opinion pays dividends to both seller and buyer as both parties have confidence in the information moving forward with the purchase and sale.
A common question is: “do I need to cut my timber before I sell?” The answer is “no”. Have the timber evaluated by a credible forester; preferably one that is a member of the Society of American Foresters or the Association of Consulting Foresters as they subscribe to a code of ethics. This information only becomes useful if your real estate agent understands how it contributes to value. Is it as simple as saying “land here sells for $1,000/acre and my timber is worth $500/acre so my property is worth $1,500/acre?” Absolutely not. That would be akin to paying $50,000 for a property, building a $150,000 home and saying that this property is now worth $200,000. Again, not true. As the value of timber increases, the value of the “bareland” generally will decrease in some proportion. What many real estate agents do not see in comparable sales is the effect timber (or trees, for that matter) did or did not have on that sale.
At the end of the day, your property’s value depends on its Highest and Best Use, and the contribution that your timber resource has certainly has an effect on what that Highest and Best Use is. The quality, volume, species composition, ease of access, and proximity to timber products markets will determine whether the property would fall in the “timberland investment” market realm, or the “recreational property” market realm. Timberland Investment property would typically see the marketplace putting high values on the timber component, and lower values on the bare land component; recreational properties would see the reverse of that. With the help of a professional forester and rural real estate expert, a landowner can be sure to choose the correct “marketplace” and maximize his return when selling.
Brian Bullard has been an Associate Broker with Timberland Realty since 1989 and developed the recreation property sales portion of the business. He is a forester and natural resource manager by education and training. He holds both a bachelors and masters degree in forestry and resource management from the State University of NY College of Environmental Science & Forestry (SUNY ESF). For the past 25 years, he has helped landowners meet their objectives of improving their properties for both forestry and wildlife. firstname.lastname@example.org www.timberlandrealty.net
Cabela’s Trophy Properties is a worldwide network of recreationally orientated Land Brokers with regional expertise in, Ranch and Farm, Timber, Waterfront, Auction and Land Owner Services. We are a proud supporter of the Realtors Land Institute. www.cabelastrophyproperties.com contact Derrick Volchoff, email@example.com